ST To Borrow $1bn

ST’s cash balances have been running down as a result of unprofitability. Last year the company lost $465 million. ST’s net cash (cash less debt) position was $741 million at the end of 2013 compared to $1.192 billion at the end of 2012.

The company is to issue senior unsecured bonds which are convertible into ST shares.

There will be two types of bond – $600 million of five year bonds which carry no interest, and $400 million of seven year bonds which will pay 0.5-1% interest.

The bonds can be converted into ST shares at a value calculated on the volume-weighted average share price of STMicroelectronics.

The five year maturity Bonds, con be converted at a premium between 30% – 40%, and the seven year maturity Bonds can be converted at a premium between 31% – 41%.

The initial conversion price of the five year bonds is set at $11.9791 representing a premium of 30%, and the initial conversion price of the seven year bonds has been set at $12.0712 representing a premium of 31%.

The bonds are due to be sold on Thursday and will be traded on the Frankfurt exchange.

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21 Comments

david manners

July 23, 2014 11:11

That’s a tricky one, svs, now let me think . . . . . . .

svs

July 23, 2014 09:46

I made further thoughts on the deal.

Besides being pure politics (banks helping the governments not to lay off people) the nature f the bond speaks for itself: it’s a convertible. At maturity, if the stock price will be lower than the strike price, banks will go for repayment. If stock is low, chances are that there will not be money torepay. Without money, banks will have to convert or accept restructuring. Basically, we are seeing with ST what happened with FIAT and the banks. With a massive difference: Marchionne vs Bozotti. Now guess the outcome.

david manners

July 22, 2014 18:37

it looks as if the banks have been given the nod over anatocism here in the UK as well, svs, judging by the emergence of companies like Wonga backed by the big banks. As you say, ST’s zero/low interest bond looks like a painless way to fund Bozotti’s lossy tenure to the end of its term at no cost to ST, leaving Bozotti’s successor to try and clear up a big pile of doo-doo.

svs

July 22, 2014 17:27

This transaction smells politics. The banks allow ST to pay bonuses and wages for three years (avoiding to face an occupational crisis in France and Italy), while hoping that the market will peak-up again. In exchange the two governments grant to banks nice rewards: e.g. in Italy they made anatocism legal in these days.

Box mandate is due to expire before maturity, leaving how to repay the bond to his successors.

Yes it’s a lovely job being a top manager in a European techno-charity, grax, it doesn’t matter if your numbers are crap you just keep picking up the salary and perks until retirement day.

grax

July 05, 2014 22:58

ST is just an example of how poor industrial management is in Europe where engineers are as good as in US but top managers really the worst possible and UNMOVABLE … I never saw anyone of these guy fired and it will never happen …
IN EUROPE we are UNCAPABLE TO FIRE TOP MANAGERs !!!
strong with weaks and weak with strong

david manners

July 04, 2014 09:08

Yes Jack, post-Pistorio, ST has been a massive disappointment to everyone in the European chip industry. Externally it behaves like a techno-charity taking taxpayers’ money where it can, internally it behaves like a private equity owned company, under-investing while over-rewarding management.

Jack

July 04, 2014 08:51

ST has been outperform, outmanouvre and beaten badly. No more being 1st tier supplier, taken over by slimmer Infineon, NXP, Invensense, etc. Neilie Kroes must had shaken her head seeing Boz got his term extended. It’s like Terminator vs Godfather.

david manners

July 02, 2014 20:02

Yes indeed Bitter, some managements have the interests of the company at heart, some have their own interest at heart. Running down the company while the management profits handsomely is not a pretty sight.

david manners

July 02, 2014 19:56

Sorry Mike, my mistake. Stupid of me. Of course you’re right. Recently grax told us about the ARM-based server chip project which could have been a massive big deal but ST management didn’t have the balls for it. No balls for flash, no balls for wireless, no balls for risk. How can you do anything but shrink with that outlook?

Mike Bryant

July 02, 2014 19:08

I was talking about ST David, not Intel/MS. ST has a good range of products that could be expanded with proper R&D funding but instead they overpay executive team and underfund R&D, then have to use financial instruments like this to keep going.

Bitter

July 02, 2014 17:12

Well, whatever is left of the managerial and engineering competence at ST urgently need to grow a pair of b***s and execute a Moore, Noyce and Grove tactic.

Simply facehug ST’s complacent executive **** suckers in the corrupt snouts of theirs and later do a proper corporate chestburster with the best and brightest.

Keith

July 02, 2014 15:40

It’s sad to say, but maybe it’s time ST took a reality check and either exits the IC business or performs serious slimming down like NXP and Infineon. Let’s face it, all the old UK semi companies died in the 90′s. They didn’t get government bailouts like ST does or have their jobs protected like we don’t… so I don’t have a lot of sympathy for the demise of ST.

david manners

July 02, 2014 09:22

I agree, DontAgree, it seems a daft proposition to me but these smoke and mirrors financial wheezes are way beyond my limited comprehension

david manners

July 02, 2014 09:20

Well it all seemed a bit desperate to me Jack. Clearly ST is worried about its cash depleting and in its last two quarterly reports it referred to expected grant payments from the French government amounting to $600 million. Maybe these haven’t been paid and ST is now getting scared about the cash running out. Whether anyone will buy these bonds will be interesting. We’ll see tomorrow.

DontAgree

July 02, 2014 08:47

? I don’t get it, why on earth would anyone choose to ‘lend’ for 5 years without interest to then buy a stock at a premium from where it is now ???
Must be one of those black magic financial instruments …

Jack

July 02, 2014 08:47

Would anyone buy it 30% premium with no return or merely 0.5-1% return?
ST is like a fish going to die.

david manners

July 01, 2014 11:29

Well Intel and Microsoft are used to controlling the market Mike. They’ve controlled it for 30 years and probably see the move to tablets as a skittish aberration which has to be crushed. Like Putin slapping the Ukraine for wanting to join the EU.

Mike Bryant

July 01, 2014 10:55

Wouldn’t it have been easier just to design and sell some products customers actually wanted ?

I made further thoughts on the deal.
Besides being pure politics (banks helping the governments not to lay off people) the nature f the bond speaks for itself: it's a convertible. At maturity, if the stock price will be lower than the strike price, banks will go for repayment. If stock is low, chances are that there will not be money torepay. Without money, banks will have to convert or accept restructuring. Basically, we are seeing with ST what happened with FIAT and the banks. With a massive difference: Marchionne vs Bozotti. Now guess the outcome.

it looks as if the banks have been given the nod over anatocism here in the UK as well, svs, judging by the emergence of companies like Wonga backed by the big banks. As you say, ST's zero/low interest bond looks like a painless way to fund Bozotti's lossy tenure to the end of its term at no cost to ST, leaving Bozotti's successor to try and clear up a big pile of doo-doo.

This transaction smells politics. The banks allow ST to pay bonuses and wages for three years (avoiding to face an occupational crisis in France and Italy), while hoping that the market will peak-up again. In exchange the two governments grant to banks nice rewards: e.g. in Italy they made anatocism legal in these days.
Box mandate is due to expire before maturity, leaving how to repay the bond to his successors.